“The income-producing real estate market in Tel Aviv continues to rise at a pace we have never known before,” said Yoram Blumenthal, Co-Managing Partner at Cushman & Wakefield Israel (Inter Israel). “The developers are asking for prices of 140 shekels per square meter, or 150 shekels or more, and that’s beyond all expectations we had. Only in the two weeks before the holiday started did we feel a sense of relief.” Israel and the international real estate market are currently trying to recover from the severe blow of the Covid pandemic. The income-producing real estate market in Israel remains stagnant, but Tel Aviv, where prices are rising rapidly, is a different story. According to the Cushman & Wakefield survey for the first half of 2021, Tel Aviv topped rental rates at an average of 107 shekels per square meter per month, followed by Herzliya (92 shekels per square meter), and Ramat Gan (90 shekels per square meter). Raanana, Rehovot, and Ness Ziona (72 shekels per square meter). Other real estate service companies such as CBRE and Natam found slightly different rates but the same ranking with Tel Aviv very ahead of the field. Cushman & Wakefield’s figure of NIS 107 per square meter per month for the first half of 2021 is slightly higher than NIS 106 in 2019 and NIS 98 per square meter in 2020 after the Covid-19 pandemic. It is now clear that prices jumped sharply in Tel Aviv in the third quarter of 2021, which is about to expire. A good example of this comes from the Meuhedet Health Fund, which is interested in purchasing the WE building located between the Ayalon Highway and Menachem Begin Road, north of the Azrieli Center. The 13,000 square meter building with 180 parking spaces is owned by the Weiss Pandom Group and is said to be worth NIS 350 million unfinished. This translates to rental rates of about 140 shekels per square meter per month. In this part of Tel Aviv, Blumenthal says, prices could be higher in premium projects such as the new Azrieli spiral tower, where fintech firm Rapyd has leased 14,000 square meters for NIS 160 per square meter per month. Rapyd also rented an 11,000-square-meter and 2,400-square-meter balcony in the Azrieli Triangle Tower for NIS 140 per square metre. These deals were concluded in the first half of 2021, paving the way for higher prices in the current half of the year. Related Articles Kos Tech Drives Huge Demand for Office Space in Tel Aviv Central Tel Aviv Towers Rule the Technology Office Market Rapid 15-storey lease in Azrieli Triangle, Battle of Tel Aviv Spiral Towers from Billboards I don’t remember a situation where the market went down by 10% in terms of prices and space occupancy and corrected the decline in less than two quarters, and all this in a very small area: Menachem Begin Road, Yigal Alon Street, Rothschild Street, and Saul Hamelch. It does not extend to the Ramat Gan Diamond Exchange.” According to Cushman & Wakefield, deals totaling 190,000 square meters of office space have been completed in 2021 so far. “That’s 24% more than the annual forecast we had at the start of the year, and that was very optimistic, and we’re only in September,” Blumenthal said. Another example of how the Tel Aviv office market is booming (the boom does not include Ramat Hayal) is the Africa-Israel project and the Millesron Landmark project in Sarona where 90% of the space is leased out in the new 40-storey development. Blumenthal notes that service providers such as banks, insurance companies, and law firms are moving a little further afield, even if they are within Tel Aviv. Take, for example, Gornitzky & Co. Which moves to Vitania Tower via La Guardia Interchange and Chipolite moves from Museum Tower to Hassan Aref. Herzog Fox Niemann from Asia House also moves to Hasan Aref, and Veron moves to Yad Eliyahu. Banks move to an ally project in Rishon Lezion and Lod, which began years ago when Mizrahi-Tefahot moved to Ramat Gan. “What’s happening now is that high tech, those organizations that we’re seeing for the first time are hiring employees through TV ads, that have raised impressive sums in the last year, are moving into this space being vacated by legacy organizations,” he said. Blumenthal said the companies that have replaced banks, insurance companies and law firms are not global companies. “We’re talking about unicorns and start-ups, many of which have Nasdaq IPOs but are entirely Israeli-managed: a similar website, iron source, risks and a long list of companies. Google and Microsoft are neither in this game nor in a position to respond – they are left in their wake. Companies like Amdocs, Microsoft, SAP, etc. have been abandoned.” “These companies have made a lot of money and now they are hiring a lot of employees, employees need to sit at a desk, in addition to needing to offer them the best salary, you also need to offer them The best office in the best location.And it all revolves around this small geographic area where all the companies that raised about $10 billion in the past five months have gone.The Pelephone House of Beit Havarod in Givatayim, which has an area of 18,000 square meters, was leased to a startup after it Failed to find space along the area of Menachem Begin Road.Riskivd leased all space in Europa House formerly home to the tributary law firm Magriso Pinkle, which merged with Shepolith and left for offices on Shaul Hamelch Street . monday.com rents thousands of square meters of the Rubinstein Twin Towers in Hassan Arafi. Switchup, which leases office space in buildings and adapts them to clients’ needs, has recently leased several buildings, all in Tel Aviv. Is this trend likely to continue and has Covid not convinced companies to reduce office space so employees can work more from home? Blumenthal doesn’t see it that way. “Real estate is about long-term operations. It is about locating, signing contracts and building. What happened reminds me more of the stock market and unlike residential real estate that has soaring prices all over the world, with offices in Tel Aviv that is unique. It is a milestone.” These companies have realized before anyone else that working from home does not work. It can work some days of the week but there has to be a situation where all the company is together. Even if it happens two or three days a week, you need space to contain all of the company’s employees under one roof at the same time. Everything we heard about moving to work from home just didn’t happen. Tech companies were the first to identify this. Those who continue to work from home are not primarily high-tech companies. “You can’t ignore the fact that the residential real estate market is booming as well, is there anything connecting the two markets, or is it just a coincidence?” I think that cheap of the money is what the two have in common. The housing market is booming because of cheap money i.e. low interest rates and for high tech, when did you see the last time a group of companies announced hiring employees on TV? Usually TV is for advertising household goods, cleaning supplies, cosmetics and suddenly you see TV campaigns and billboards. In this world too, there is a lot of money that has resulted from big public performances. “The other thing they have in common is that Tel Aviv opens a big gap from the rest of the country.” The geographical area we are talking about is very small and hardly extends to the eastern side of Ayalon and does not touch the towns of Tel Aviv, Ra’anana, Kfar Saba, or Petah Tikva, and this is something unusual. Very.” Published by Globes, Israel business news – en.globes.co.il – September 20, 2021 Copyright Globes Publisher Itonut (1983) Ltd. 2021
Tech cos acquires the office market in Tel Aviv
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